PGNiG Claims Partial Win in Gazprom Ruling (Update)
(Adds comment from Gazprom)
Poland's main gas importer and supplier PGNiG said June 30 that an ad-hoc Arbitral Tribunal in Stockholm had ruled that the contractual condition for PGNiG to demand a revision of the price of gas supplied to Poland under the Yamal Contract had been met and was justified.
However, Gazprom said that the contract already contained a provision for revising the price, and that Poland had lost the main battle: it wanted gas hub pricing, rather than oil indexation.
The tribunal granted Polish state-run PGNiG’s claim and ruled in its partial award that the contractual condition for PGNiG to demand a reduction in the price of the long-term contract under which gas is supplied to Poland by Russian monopoly piped gas supplier Gazprom (the so-called Yamal Contract) had been met, said PGNiG.
The tribunal accepted PGNiG’s key arguments indicating the need of reduction of the contract price and rejected Gazprom’s arguments in support of maintaining the current non-market pricing terms under the Yamal Contract.
"We are satisfied with the tribunal’s ruling which confirms PGNiG’s right to demand a reduction of the contract price and we await the reduction of the contract price to the level of market prices at a later stage of the proceedings," said PGNiG CEO Piotr Wozniak.
PGNiG said that the current contract price did not reflect market levels of gas prices and that, therefore, PGNiG in 2014 had decided to apply a contractual option of revision of the contract price, as provided for in the Yamal Contract. After the contractual period for renegotiation expired in May 2015, the Polish company referred the dispute for resolution by the ad-hoc Arbitral Tribunal in Stockholm and in February 2016 it filed a statement of claim against Gazprom.
The tribunal however rejected the method for changing the price and pricing formula suggested by the Polish company. Among others, the tribunal has not accepted PGNiG’s arguments that the only relevant pricing factor in the long-term contracts were the hub prices, Gazprom said.
The tribunal will produce a final award taking into consideration the conclusions and principles set by the First Award, and after additional consultations with the parties.
The Yamal Contract, signed in 1996, provides for the supply of some 10bn m3/yr of gas until 2022. Under its take-or-pay clause, PGNiG has to offtake at least 8.7bn m3/yr.
PGNiG’s strategy is to consistently diversify the sources and directions of gas supplies and it has indicated it may not renew the Gazprom contract, when it lapses in four years' time. PGNiG’s main focus is on the construction of the Baltic Pipe gas link, which from 2022 onwards should enable it to import Norwegian gas, including some of its own equity production (such as at the Skarv field).
PGNiG also imports LNG, which last year accounted for 13% of the company's imports, from Qatar, Norway and the US. At last week's World Gas Conference in Washington DC, the company initialed agreements for the supply of some 4mn mt/yr from Venture LNG and Sempra starting 2022-23, which could effectively replace 40% of the Gazprom contract if they are subsequently firmed up.
Gazprom exports to Europe up 5.7% in 1H2018
Gazprom's website carried no statement about the Stockholm ruling, but mentioned that at its June 29 annual shareholders meeting that its CEO Alexey Miller and chairman Viktor Zubkov had been renominated, as part of a new board of directors - also with a new nine-member audit committee.
Its sales arm Gazexport, speaking June 29, also said that Gazprom expected to have supplied 101.2bn m3 to the European market during 1H2018, up 5.7% (or 5.5bn more) more than in 1H2017.
It also forecast that by end-2018, Gazprom’s exports to the 'far abroad' (hard currency markets that exclude the former Soviet Union) will renew the historical record and exceed 200bn m3. Its previous record, 194.4bn m3, was set in 2017, when Gazprom’s share of gas consumption in Europe reached 34.2%. Russian measurements have slightly a lower calorific value than typical North Sea gas.
Gazprom CEO Miller said that the Russian giant aims to increase its own gas storage capacities in Europe to 5% of the annual export volume, and is eying new opportunities for such in Austria, Slovakia, as well as in China and elsewhere. It also delivered LNG to nine countries during 2017, mostly in the Asia-Pacific. However Spain became a new client of Gazprom in 2017, said Miller